Gold Slips to $1,822, Amid a Bearish Correction – Brace for a Sell Trade

Currently, the XAU/USD pair is trading at 1,824.74, and consolidating in the range between 1,823.80 and 1,831.85. The US PMIs for December may provide some intermediate direction for gold this week, but the focus will be on the FOMC Minutes and the US employment numbers for December.

Despite the surging COVID infections and geopolitical tension between Russia and Ukraine, the market trading sentiment managed to start 2022 on a positive path. Despite this, S&P 500 futures are up 0.55%, while the US Dollar Index (DXY) is close to a one-month low, amid cautiously optimistic markets. The latest corrective decline in the gold prices is supported by a light calendar and selling in numerous markets, ahead of significant weekly events. Still, rising expectations of higher Fed rate hikes in 2022, coupled with virus concerns, are likely to pose a challenge to gold buyers.

The minutes of the Federal Open Market Committee (FOMC) meeting, as well as Friday’s US Nonfarm Payrolls (NFP), will be important news to follow. The final readings of the US Markit Manufacturing PMI for December may provide immediate guidance for intraday trading.

However, the upticks in the market trading sentiment could be short-lived, as escalating fears surrounding the South African COVID variant, coupled with the drama plaguing China’s troubled real-estate firm, Evergrande, not to mention the geopolitical tension between old rivals, Russia and Ukraine, are undermining investor confidence.According to the news, the number of COVID-19 cases is increasing, with an average of over a million cases detected every day between December 24 and December 30. Over 4,000 flights were cancelled throughout the world on Sunday, on the basis of this news, “with more than half of them being US flights, adding to the toll of holiday cancellation difficulties, owing to severe weather and the rise in numbers of COVID-19 cases.” This escalation on the COVID-19 front is likely to help limit the losses for the safe-haven metal, gold.

On Monday morning, the dollar climbed in Asia, although it had a quiet start to 2022, because of holidays in many key Asia-Pacific markets. The global spread of the Omicron COVID-19 strain, which is bolstering safe-haven demand, continues to influence the market sentiment. Even though the number of cases in Xi’an, in western China, has dropped, Johns Hopkins University figures reveal that the number of infections globally topped 290 million as of January 3. The recent upward rally in the US dollar also tends to undermine the XAU/USD pair. The US Dollar Index, which measures the value of the greenback against a basket of other currencies, has risen by 0.29 percent, to 95.870.

Moving forward, it is anticipated that buyers of gold will be challenged by rising expectations of quicker Fed rate hikes in 2022, not to mention the spread of the coronavirus. In addition to this, it will be important to keep an eye on the minutes of the Federal Open Market Committee (FOMC) meeting and Friday’s US Nonfarm Payrolls (NFP). The final readings of the US Markit Manufacturing PMI for December may provide immediate guidance for intraday trading.

Gold is trading substantially higher, at $1,824, following a bearish reversal after attempting the $1,830 resistance. The XAU/USD pair is obtaining immediate support on the 4-hourly chart at around 1,824, which is being prolonged by the daily pivot point mark.

Closed candles above this level suggest a rise in gold; on the higher side, considerable resistance remains at around 1,834 and 1,840.
A bullish break beyond this level would expose gold to the 1,850 level.